U.N. Talks Up Pressure On Australia's Climate Target

Date:15-Dec-10Country: AUSTRALIA/SINGAPOREAuthor: James Grubel and David Fogarty

Australia's fragile government is under increasing pressure to deepen its target to cut carbon emissions after U.N. climate talks in Mexico ended with an agreement to step up the fight against global warming.

Failure to harden the target would anger the Greens, whose support is vital to Australia's ruling Labor Party, but risks enraging the powerful mining sector and conservative opposition.

The Greens have piled on the pressure since the end of the talks in Cancun at the weekend, saying Labor's target to cut emissions by 5 percent from 2000 levels by 2020 is far too weak.

"Mexico put the mojo back into the U.N. climate talks," said John Connor, CEO of the Climate Institute think tank. "What came out of Cancun made it quite clear that we're talking about beyond 5 percent because we are talking about a world taking action."

Australia is the world's top coal exporter, generates more than 80 percent of its electricity from coal and its per-capita emissions are among the highest in the developed world.

The government has said putting a price on carbon is the only way to cut carbon emissions growth from the A$1.2 trillion economy. But it has struggled to win backing from powerful industry lobbies and the issue has proven politically poisonous.

Prime Minister Julia Gillard has pledged to speed up a decision on how to price carbon, either by a tax, emissions trading scheme or a combination, by next year and the Greens are demanding tougher action to match Europe's 20 percent cut and Japan's pledged 25 percent reduction.

"The Cancun agreement keeps the global negotiations alive on the understanding that everybody needs to lift their sights to stronger action if we are to deliver a safe climate," Greens deputy leader, Senator Christine Milne, said in a statement.

She called for Australia to deepen the cut to 25 to 40 percent by 2020. The government in the past pledged to cut by up 25 percent if other big emitters such as China and the United States signed up to a tough climate pact.

FIRST CUT NOT THE DEEPEST

The mining industry, however, said Australia's reliance on resource exports exposed the country to higher costs than other developed countries when it comes to curbing emissions.

"Even a 5 percent cut for Australia costs us much more in lost gross domestic product than a bigger cut in Europe," Minerals Council of Australia deputy chief executive Brendan Pearson told Reuters.

He said government modeling found a 5 percent cut would cut economic growth by more than 1 percent, and would be double the impact of a cut of up to 20 percent in Europe.

But analysts say the government faces pressure to act.

"We can no longer assume the government will simply be able to proceed on its own terms, especially if that is a minus-5 percent target," said Martijn Wilder, global head of Baker & McKenzie's climate change practice in Sydney.

"We should also not dismiss the fact that if the government wants to get its legislation through the parliament, it may be the case that the Greens and the independents insist on having a higher target of 10 or 15 percent," he told Reuters.

From July 2011, the government will need support from the Greens to pass laws through the upper house Senate. The government also relies on support from three independents and a Green lawmaker in the lower house, who want action on climate change and are part of a multi-party panel on carbon pricing.

Tough action on pricing emissions and a tougher target would pit the government against big polluters, such as miners.

"The real test for the government is whether the presence of the Greens, independents and experts in the Multi Party Climate Committee will give them the strength to stand up to the rent-seekers and commit to good policy with the ambitious goal to transform Australia's economy," Milne said.

The Cancun talks put off a decision on the final shape of an agreement but put the troubled U.N. negotiations back on track with a package of modest agreements.

Under the U.N.'s Kyoto Protocol, Australia was among the few rich nations allowed to increase its emissions during a 2008-12 first phase.

Emissions are now about 8 percent above 1990 levels and the government, and industry groups, say even a 5 percent cut by 2020 will be tough.

"The 5 percent cut to 2000 levels equates to around 21 percent below the business-as-usual projection for 2020. That means our economy would have to reduce, avoid or offset more than one in every five emissions it would otherwise make."